Gaurav was facing a tough financial situation, and needed funds on an urgent basis. He looked at the various options available. Finally, he decided to get a personal loan. While filling in his details and applying for a loan, he realised something. He needed to get his finances in order. He was at the risk of having his loan application rejected because he did not have a decent credit history. Good financial habits are a must, especially when faced with situations like availing personal loans. Here are some good financial habits that everyone should adopt:
Prepare a Budget: Make a note of your monthly expenditure and keep track of it. By budgeting your expenses, you can avoid financial disasters. Use a list when you go shopping, to keep you from unnecessary spending. Track your spending habits for a few months. Figure out what your essential needs are, and cut down on frivolous spending. Cultivate good spending habits, and try to plan your purchases in advance. Use a notebook or an app to jot down your monthly budget. This will make it easier to keep track of your money and save it.
Maintain a Good Credit Score: Make all your payments on time and do not default on loan payments or miss repaying any EMIs on your credit card bill. Set up automatic payments from your salary account to ensure that all payments are made on time. This way you can build a good credit score. Additionally, making payments on time can help you get a loan in future if you need it.
Have an Emergency Fund: Unexpected expenses can completely disrupt your financial plans. In such cases, having an emergency fund can come in handy. Set a good emergency fund goal and stick to it. Put away a part of your money in addition to your other savings. Uncertainty can lead to a financial pitfall if you do not have a cushion to fall back on. Determine how much you will need in case of job loss, illness, or any other crisis, and save up to meet those needs.
Spend Less than You Earn: Another financial habit that can help you in the long run is spending less than you earn. It is unwise to spend up all your earnings, and then use your credit card for more expenses. So, avoid going over your earning limit to prevent encountering a financial disaster. It is also important to ensure that a sizeable chunk of your earnings goes towards savings.
Adequate Income: Check if your salary is large enough to make EMI payments towards a personal loan. Also, ensure you do not have too many other loans to repay at the same time. Having too many loans to repay at one time can also lead to loan rejection. Additionally, if your current EMIs eat into a large part of your salary, your loan application could be rejected. To avoid that, show stability in your job, and ensure your salary is enough to cover your daily expenses and loan repayments.
Track your EMIs, make all your payments on time, and build a good credit history. Maintain good spending habits as well. This will make it easier for you to avail any kind of loan in the future. More importantly, it can also help you live a comfortable life as you will never have to worry about your finances.